NeuStar Announces Q2

NeuStar boosts revenue to $62.3M, up from $39.6M, while net income was $11.7M, compared with $16.2M in 2Q04

August 3, 2005

4 Min Read

STERLING, Va. -- In its first report of earnings as a public company, NeuStar, Inc., (NYSE: NSR), a leading provider of essential clearinghouse services to the communications industry, today announced results of operations for its second quarter ending June 30, 2005 and provided guidance for future financial performance in 2005.

Summary of Second Quarter Results

  • Revenue totaled $62.3 million, compared to $39.6 million reported in the second quarter of 2004.

  • Income before income taxes totaled $23.2 million, compared to $11.4 million reported in the second quarter of 2004.

  • Net income attributable to common stockholders totaled $11.7 million, compared to $16.2 million reported in the second quarter of 2004. Net income attributable to common stockholders for the quarter ended June 30, 2005 reflects an effective income tax provision of 40.0% or $9.3 million compared to an income tax benefit of $7.3 million for the quarter ended June 30, 2004, primarily due to the one-time reversal of a deferred tax asset valuation allowance.

  • Net income attributable to common stockholders totaled $0.18 per diluted share, compared to $0.23 per share in the second quarter of 2004. Per-share calculations are based on diluted weighted average common shares outstanding of 78.0 million for the June 30, 2005 quarter compared to 82.1 million in the comparable period last year.

Business Outlook for Full Year 2005

  • NeuStar expects revenue to grow in excess of 36% over 2004, to between $225 million and $235 million.

  • Net income is expected to be in the range of $49 million and $52 million, or $0.63 to $0.67 per diluted share. Per-share calculations are based on an estimated 77.3 million diluted weighted average shares outstanding.

Projected results for the full year include the effect of up to $7.5 million in annual volume credits that are earned on all transactions in excess of the pre-determined 100 million transaction cumulative annual volume threshold under NeuStar’s contracts to provide telephone number portability services. Based on the strong growth in transaction volume in 2005, the company expects to reach the 100 million transaction threshold in August 2005; in 2004, the 100 million transaction threshold was reached in November.

Discussion of Second Quarter Results

NeuStar’s year-over-year quarterly revenue growth was driven primarily by increases in transactions on contracts to provide telephone number portability services, including:

  • Addressing revenue increased 59.2% to $18.9 million, as a result of continued growth in the number of wireless subscribers, new communications services, such as Internet telephony, and the increase in wireless data services offered by NeuStar’s customers. In addition, the continued expansion of carrier networks contributed to the demand for addressing services.

  • Interoperability revenue increased 59.0% to $13.5 million due predominantly to increased competition for existing subscribers among service providers as well as consolidation of service providers, requiring the integration of disparate systems and networks. Also contributing to this growth was revenue from the company’s enhanced order management clearinghouse services.

  • Infrastructure and other revenue increased 55.3% to $29.9 million primarily due to increased demand for the company’s network management services in support of activities such as service disconnects, consolidation of service providers and implementation of new technologies.

Total operating expense in the second quarter of 2005 rose 40.2% to $39.3 million from $28.0 million in the comparable quarter of 2004, primarily due to increased personnel costs to support revenue growth and business expansion initiatives, as well as $3.8 million in non-recurring costs related to the company’s initial public offering in June of 2005. Total headcount at June 30, 2005 increased 31.6% to 483 compared to 367 at June 30, 2004.

As of June 30, 2005, the company had $81.2 million in cash, cash equivalents and short-term investments, an increase of $5.6 million compared to March 31, 2005. This increase resulted principally from cash provided by operating activities, offset by payment of cash dividends of $6.3 million to our preferred stockholders prior to their conversion into Class A common stock in connection with our initial public offering.

Management Commentary

“NeuStar’s clearinghouse services are essential to the communications industry in managing change,” said Jeff Ganek, NeuStar’s Chairman and CEO. Ganek continued, “Communications service providers trust NeuStar’s reliability, neutrality and leadership to manage industry changes, such as Internet telephony and wireless data, to facilitate carrier consolidation and for information exchange automation between providers. These were key drivers for our second quarter’s performance.”

Jeff Babka, NeuStar’s Chief Financial Officer, added, “We are pleased that in our first opportunity to report as a public company, NeuStar was able to announce the highest quarterly revenue in our history, and continued growth in profitability and cash flow.” Babka continued, “The industry factors that helped us achieve an exceptional 48% revenue growth in 2004 are continuing in 2005 and give us confidence in our ability to deliver the strong growth in revenue and profitability reflected in our full year guidance.”

NeuStar Inc.

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